Thursday, July 20, 2017

Coloring books with grown-up themes were the hot item of 2016 for both brick-and-mortar bookstores and for retail sales of magazines.

Publishers eagerly jumped aboard the bandwagon, cranking out new products in a category that’s well-suited to analog, in-person sales and definitely ill-suited to electronic editions. (Seen a Kindle edition of a coloring book lately?)

Now many stores have grown wary of the category, as sales plummet and inventory stacks up, according to book-industry sources.

Barnes & Noble reported that coloring books were the main reason its Sterling Publishing Co.’s sales grew 22% in the year that ended on April 30, 2016 – and declined 20% during the following nine months.

Recently, B&N management reportedly told its buyers to put the kibosh on bringing in any more adult coloring books, "with rare exceptions."
Other retailers are predicting their 2017 book sales will be down versus last year because of the coloring book crash.

Data about sales of adult coloring bookazines distributed via the
“newsstand” (magazine retail) system are harder to come by. Magazine
publishers were later to the party than book publishers, but many still
profited for a while.

The MagNet newsstand-analysis service reported in early 2016 that the category was growing in both titles and unit sales, “with many releases selling over 125,000 copies on the newsstand at higher cover prices.”

But the coloring book trend seems to have cooled off, if not crashed, for magazine publishers as well. No longer does every industry conferences include a speaker telling us that the way to stop the newsstand system from circling the drain is to publish more adult coloring books.

And Cosmo never did publish the Kama Sutra Coloring Book, packaged with a box of 24 different "Flesh Tone" Crayolas, that I was so hoping for.

My
friends in the book trade say the Next Big Thing is joke books. Some
will say the magazine industry got a jump on that trend with all the
special issues about President Trump. (But I, for one, am not laughing.)

Profit? That's for other products. Amazon gets more important benefits from selling books.

Despite its dominance of the book business, Amazon probably derives little, if any, direct profit from selling books. But, as demonstrated by its new brick-and-mortar stores, Amazon derives plenty of value from books.

You can’t understand Amazon the book seller – and how to work with or compete against it – by thinking only about books.

For Amazon, books have always been a springboard to bigger and better things. The company was at best a breakeven venture in its early years as a books-only and then books-mostly retailer, and today it still doesn’t have to earn a cent of profit from books to be a successful bookseller.

Even when Amazon.com started up 22 years ago as an online bookstore, Jeff Bezos’ vision went far beyond books. Or profits: He reportedly didn’t plan to earn a profit for at least four years.

The focus was on growth – acquiring new customers, retaining them with an unmatched shopping experience, and then leveraging that customer base to expand into new types of products.

Books were the perfect way for Amazon to cuts its teeth as an online store. Perhaps no other consumer product offers more SKUs per dollar of sales. Even the largest physical bookstore in the world couldn’t possibly stock anywhere close to all of the books in print.

That left an opening for Amazon that the fledgling company could exploit only by mastering the art and science of marketing, selling, storing, and shipping hundreds of thousands of titles. The resulting lessons it learned and innovations it developed became the foundation for its rapid expansion into other types of merchandise.

Selling books shaped Amazon as much as Amazon reshaped how books are sold.

A gift from book publishers

Amazon recognized early on that each unique snowflake of a book came with a gift from its publisher: book metadata. That’s the information about each title (such as genre, author, description, unique ID number, and reviews) that traditionally enabled bookstores and libraries to decide what to buy and where to shelve it.

A 2006 Amazon promotion

Amazon took the radical (in the mid-1990s) step of putting all that metadata online, enabling it to dominate book-related searches.

Without Amazon having to spend a cent on marketing, consumers soon learned via the likes of Yahoo! and later Google where to find a title not stocked by their local bookstore. And they learned Amazon would show them similar books, using a recommendation engine fueled by book metadata and other customers' purchase history.

I’m told it took well over a decade for the traditional book-publishing industry to grasp that book metadata should be written for algorithms and consumers, not just for professional book buyers. By then, Amazon had long since leveraged what it learned about the data-based selling of printed books to dominate the e-book business – and to power its moves into selling everything from toasters to groceries.

A gateway drug

To make books a true gateway drug to the Amazon experience, it wasn’t enough just to stock every book publishers had to offer. Too much of the demand was for books that were no longer in print.

From Amazon's Japanese-language site

Amazon had to lure those used books out of myriad basements and offline stores by creating a marketplace that even non-techies could use to sell their wares. That was the beginning of what became a major competitive advantage for Amazon – its third-party sellers, which generate nearly half of the site’s sales.

Books were also the launching pad for Amazon’s entry into the gadget business nearly 10 years ago with the release of its first Kindle. That venture has traveled light-years from those humble, monochromatic beginnings to a new Alexa-enabled world filled with Fires and Echoes.

Revolution, then civil war

“Kindle” itself morphed from a device to an entire ebook-publishing ecosystem that brought both revolution and civil war to the book industry. The Kindle Revolution popularized the struggling ebook category and democratized publishing by enabling authors to bypass the traditional world of publishers and middlemen.

To those in the traditional book-publishing business, Amazon is the Evil Empire, hell-bent on destroying both book publishing companies and competing book sellers. On the other side of the civil war are myriad author-entrepreneurs hailing Amazon as the white knight who valiantly liberated publishing from snobby, self-appointed gatekeepers so that anyone can publish a book.

Neither side seems to understand Amazon, because they envision Amazon as being fundamentally a seller of books. It’s not. A 2014 New Yorker article indicated that Amazon gets at most 7% of its annual revenue from books.

Where’s Chapter 11?

Journalists and book publishers have been assuming for years that Amazon wanted to drive Barnes and Noble out of business. I don’t buy it. Why create a firestorm of legal entanglements and public-relations backlash for the entire company just to boost profits in a relatively slow-growth 7% of your business?

If Amazon really wanted to drive large bookstores out of business, don’t you think B&N would be in bankruptcy reorganization by now? And wouldn’t Amazon’s new brick-and-mortar stores at least match the 20,000-title selection of a small B&N instead of offering only 5,000 titles?

Besides, I don’t think book selling for Amazon is about profits. It’s about data and branding.
As I wrote in Magazines in the Amazon, a recent Publishing Executive article, Amazon is “a master at using customers’ purchase and search data to determine what other products to pitch to them – and, increasingly, to sell ads to third parties.”

Fifty Shades of Data

More than almost any other purchases, the books someone buys and browses, whether print or ebook, provide Amazon valuable insights into what other products she might buy and which ads she might click. (Magazine purchases can be even more revealing, which I think is why Amazon is selling single-copy magazines in its new brick-and-mortar stores even though it doesn’t market them on its web site.)

In the ecommerce and programmatic advertising worlds, such information about people’s interests and purchase intent is gold.

Some book purchases are more revealing than others. I assume that people interested in travel guides are relatively likely to click on luggage ads, that buyers of how-to guides often need tools or other equipment as well, and that Fifty Shades of Grey readers have a fondness for certain adult toys.

And I’m sure that Amazon’s algorithms have found many other valuable correlations -- correlations that would never occur to the human brain -- between what people read and what else they’ll click or buy.

In other words, for Amazon, some books are more valuable than others. That may explain why Amazon seems to discount select books to seemingly unprofitable levels, allows third-party sellers to charge as little as 1 cent for used books, and encourages self-publishers to offer 99-cent and even free ebook editions.

When there are such strong incentives to know what books people are searching for and especially what they’re buying, profit on book sales naturally takes a back seat.

Big McAmazon

Obvious question: If Amazon makes little or no profit from selling books, why is it opening a chain of brick-and-mortar bookstores?

Answer: It’s not. Amazon Books is probably a bookstore in the same sense that McDonald’s is a hamburger restaurant. Burgers are of course the featured attraction at Mickey D’s, yet almost all the profits come from side items. But who’s going to eat at a fries-and-soft-drinks joint?

Early reports indicate that about half of the new Amazon Books stores are actually devoted to books. The rest of the space offers appliances, Amazon-branded gadgets, magazines, and other non-book merchandise and displays.

Amazon wants you to think of these places as bookstores – as places where interesting, curious people go to browse. The real money may be in getting those browsers to check out the Fires, Echoes, and Cuisinarts. But if people wanted to hang out at appliance stores the way they do at bookstores, Best Buy would be a major tourist attraction.

The hipsters' Walmart

In many ways, Amazon is the Sam Walton model translated to the digital age – massive selection, with low prices made possible by both scale and an incessant drive for efficiency. There’s significant overlap in the products offered by Amazon and Walmart. Yet why has Amazon escaped the downscale, hope-my-friends-don’t-find-out-I-shop-there image that plagues Walmart?

Books. Plenty of people buy from both Amazon and Walmart, but the public’s perception of the two brands are vastly different. Amazon’s beginnings as an online bookseller meant its clientele was – and still is -- assumed to be hip and educated. Because of Walmart’s start in small-town USA, it’s still the butt of many a comedian’s quip about the denizens of double-wides.

In marketing, perception is reality. That’s why Amazon still wants people to think of it as a bookseller and to ignore that 7% statistic.

If Amazon’s vision to be The Everything Store continues to mean a 20+% annual growth rate, books will constitute an ever-shrinking proportion of its sales. Nevertheless, books are likely to remain Amazon’s Big Mac – not very profitable but still central to its brand identity and its strategy.

Thursday, June 1, 2017

Three mailers' organizations blasted a labor deal with the National Association of Letter Carriers today as proof that the “spendthrift monopolist” U.S. Postal Service “cannot be counted on to control its costs or prices.”

“Rather than bringing compensation more in line with the private sector – as required by postal law – the tentative agreement with NALC worsens the problem,” said a joint statement from Postcom—The Association for Postal Commerce, MPA—The Association of Magazine Media, and the Alliance of Nonprofit Mailers.

In defending the current inflation-based price cap on most postal rates, the statement said, the coalition has presented expert testimony showing "that postal workers are paid nearly twice what the private sector pays for similar work."

“The NALC contract confirms that the Postal Service cannot be trusted to make the tough decisions needed to control its own costs.”

The collective bargaining agreement released May 12 would give career letter carriers three pay raises totaling 4.7% over the 40-month life of the contract in addition to seven cost-of-living adjustments. The three mailers groups indicated that the Postal Service didn’t get anything in return for the generous pay package, such as the ability to save money by filling openings with more low-paid non-career employees.

Keeping the cap on CCAs
“Instead of continuing a shift to lower-cost employees, the agreement converts many City Carrier Assistants (“CCAs”) to career status and preserves existing narrow limits on the total number of CCAs that the Postal Service may employ,” the statement said.

“The NALC deal is only one of a recent series of collective bargaining agreements that widen the postal employee compensation premium rather than narrowing it.” The NALC says the contract would cover 213,000 active employees if the union’s members ratify it.

“It is commendable that USPS provides stable, middle-class employment for a large number of employees, but substantially over-compensating them, and paying for this with above-inflation rate increases for mailers, is inappropriate and jeopardizes the whole enterprise. There are proven ways to rein in excess labor costs without disrupting the lives of existing employees,” the coalition's statement said.

Postal officials are seeking legislative relief from the 10-year-old law that keeps rate increases proportional to changes in the Consumer Price Index. But the coalition, along with other mailers, argues that the cap has forced more financial discipline on the USPS and prevented it from imposing large rate increases that would hurt both mailers and the Postal Service itself.

Thursday, April 13, 2017

A 2011 presentation explained how FSS would streamline the handling of flat mail. Oops!

What many have long suspected has now been confirmed: The U.S. Postal Service’s Flats Sequencing System is a disastrous failure that cannot be fixed.

The FSS is adding so much to the costs of handling magazines, catalogs, and other flat mail that no amount of machinery tweaks, Lean Six Sigma projects, or "Tiger Teams" can ever make it right.

“When all processing and delivery costs are included, an average Periodicals flat addressed to an FSS zone costs over 10.5 cents more than if addressed to a non-FSS zone,” postal expert Halstein Stralberg wrote recently.
Assuming the same 40% cost differential applies as well to flat-shaped Standard Mail, such as catalogs and retailer flyers, Stralberg’s analysis indicates that FSS is adding several hundred million dollars annually to the Postal Service’s costs.

And that doesn’t even count the $1.3 billion spent on purchasing the huge machines or the additional investments in building modifications, training, and other start-up costs.

“Because of the large investment in the FSS and the great hopes that were attached to them, USPS managers appear still unwilling to admit that the program is a failure,” wrote Stralberg, a longtime consultant on postal costing and prices to Time Inc.

Another utopian vision from 2011

Based partly on Stralberg’s analysis, three mailer organizations recently called for the USPS to “(1) retire the FSS machines, (2) allow mailers of flat-shaped mail to prepare their mail for (and qualify for) Carrier Route and other discounts in all zones; and (3) make Carrier Route and other worksharing discounts for flats deep enough to cover 100 percent of the costs avoided by the worksharing.”

The three organizations are MPA-The Association of Magazine Media, the Association for Postal Commerce (aka PostCom), and the Alliance of Nonprofit Mailers.They submitted their comments and Stralberg’s analysis to the PRC to counter the USPS’s proposal to abolish the inflation-based cap on Periodicals postage rates, as explained in my recent Publishing Executive article, Postal Rate Fight Continues as Publishers Battle USPS "Stupidity Tax".

A 2003 Stralberg presentation correctly predictedFSS mail would cost more than carrier-route flats.

Stralberg’s predictions in 2003 about why FSS would not reduce flats-processing costs have turned out to have nearly prophetic accuracy, except the program turned out even worse than he expected.

For example, he contradicted postal officials who claimed that their costs for FSS-sorted pieces would be lower than for pieces in carrier-route bundles. (Postal officials now acknowledge that carrier-route mail is cheaper to deliver than FSS mail.)

But Stralberg never predicted that the FSS cost per Periodicals piece would be nearly double that of carrier-route pieces, as his recent analysis shows.

Here’s the MPA/PostCom/ANM summary of why the Postal Service’s assumptions about FSS turned out to be so fatally flawed:

1) “The Postal Service’s planners greatly underestimated the extent to which mailers would sort flats to the carrier route level.” About half of flat-mail copies were in efficient carrier-route bundles when FSS was first conceived more than a decade ago. Because of co-mailing and similar mail-consolidation efforts by printers, the proportion is now higher than 70% in non-FSS zones. (When a system nearly doubles the cost of handling 70% of the mail, it cannot possibly save enough on the other 30% to reach breakeven.)

The view from 2010, before reality intruded.

2) “The Postal Service overstated the costs of manual sequencing of carrier route flats by carriers, and thereby overestimated the costs saved by diverting the sequencing work to the FSS.” Stralberg called out this flawed assumption in a 2003 presentation to mailers and postal officials.

3) “The Postal Service, erroneously assuming that practically all flats within an FSS zone would be placed in delivery sequence by the FSS, removed the vertical flats cases carriers had used for manual sequencing.” This triumph of optimism over reality adds to the amount of time carriers need to prepare flat mail for delivery. Barely half of the flats in FSS ZIP codes are presented to carriers in delivery sequence.

4) “The Postal Service’s planners incorrectly assumed that nearly all flats would be machinable on the FSS.” Stralberg warned in 2003 that flat mail unsuited for the Postal Service’s existing machines probably couldn’t be handled on the FSS, meaning that “non-machinable flats will cost more” under FSS.

5) “The Postal Service’s predictions that practical concerns about the FSS machines themselves, including their footprint, cost, and complexity, would be solved during the design and implementation of the system proved incorrect.” That’s nearly a direct quote from Michael Plunkett, a USPS pricing manager when FSS was being developed and now PostCom’s President and CEO. He also told the PRC, “From the outset of the FSS project there was significant skepticism that the proposed technology would achieve the intended results and concern that substantial capital was being invested in a system that would unnecessarily complicate a network that already needed to be rationalized.”

6) “Finally, because flats mail volume was lower than the Postal Service had expected, it added many outlying zones to the territory covered by each FSS machine, causing substantial service degradation.” Mailers warned postal officials more than a decade ago that digital disruption was reducing the volume of printed catalogs and magazines, but the Postal Service persisted with an FSS plan that assumed gradually increasing volumes. Flat mail peaked in 2005 and has dropped about 40% since then.

Wednesday, March 22, 2017

The New York Times published a two-minute 360-degree video today of its own printing plant in action.

The video doesn't try to be comprehensive, instead focusing on arresting shots that show the scale and sophistication of the operation -- such as a robotic crane transporting a massive roll of newsprint from storage and a web of already-printed paper picking up color as it zips through the press.

Plus what looks like an amusement-park ride for newspapers, which transports the printed product from the pressroom, then automatically bundles, palletizes, shrink-wraps, and loads into on to a delivery truck.

I've been in a lot of pressrooms, and I've never seen as much automation as The Times has.

Nor have I seen working press operators who weren't sporting earmuff-style hearing protection. I don't think The Times employees were even wearing the little foam in-ear inserts. Perhaps the press is unusually quiet, or perhaps The Times' occupational-safety rules are more lax than those of magazine printers.

Saturday, March 18, 2017

The increasing use of non-career letter carriers has caused a steady rise in motor vehicle accidents and liability, postal officials said this week.

The U.S. Postal Service’s liability for motor vehicle tort claims (paid to victims of accidents) rose from $48 million in Fiscal Year 2015 to $88 million in FY2016, the Postal Regulatory Commission recently pointed out.

In responding to that observation on Thursday, the Postal Service explained: “Since the 2011 Collective Bargaining Agreements between the Postal Service and several employee unions, which expanded the role of non-career mail delivery drivers, there has been an increase in the number of motor vehicle accidents (MVAs).”

“The number of MVAs attributed to career carriers has remained largely flat, while those attributed to their non-career counterparts has increased out of proportion to the percentage of the carrier workforce that they occupy.”
The 2011 agreements created the non-career City Carrier Assistant (CCA) and Rural Carrier Associate (RCA) positions, which last year combined for one-fourth of the USPS’s carrier workhours.

The cost of saving money
The lower pay, paltry benefits, and more flexible schedules of the 70,000 or so CCAs and RCAs are probably saving the Postal Service at least $500 million in annual compensation. But the inexperienced employees have also meant more mis-delivered mail, employee injuries, lower productivity, higher turnover, and ballooning recruiting and training costs, according to the USPS.

The Postal Service has not provided specifics on the number of motor-vehicle accidents or what proportion of accidents or tort claims are caused by non-career employees.

The USPS told the PRC earlier this year that its FY2017 strategy for reducing motor-vehicle accidents includes “redesigning the driver training program to expand opportunities for new drivers to become more skillful. Testing will be added to the program to assess the suitability of each employee to perform duties as a professional driver.”

Saturday, February 25, 2017

Plagued by increasing turnover among non-career employees, postal officials are trying to stem the tide with new management incentives and an overhauled orientation program.

The average annual turnover rate among non-career employees rose from 38.69% in FY2015 to 42.82% last year, the U.S. Postal Service reported earlier this month. Postal officials had set a target of 34.8% for FY2016.

Turnover was worst among City Carrier Assistants (CCAs), rising from 54.24% to 59.66%. Among the other three major non-career categories, turnover for Rural Carrier Associates rose from 30.1% to 35.29%, for Postal Support Employees remained stable at 36.6%, and for Mail Handler Assistants increased from 29.86% to 37.67%.

“Most frequently cited causes for non-career employee turnover are lack of schedule flexibility, physical demands, and employee did not like supervisor,” the USPS said.

Swelling the ranks of the non-career workers – who are paid far less than their career counterparts and receive few benefits -- to more than 130,000 is yielding huge savings for the USPS. But it’s come at a cost.

Postal officials acknowledge that having so many inexperienced employees is lowering productivity, increasing on-the-job injuries, slowing deliveries, and jacking up recruiting and training costs.

“Because CCA turnover represents the biggest opportunity for improvement, non-career employee turnover was selected as an NPA [National Performance Assessment] indicator for field positions with high concentrations of CCAs (large Post Offices and Stations and Branches),” the USPS said. Pay-for-performance bonuses for postal managers are based on progress toward meeting NPA targets.

The USPS is also rolling out a revised new-employee orientation program that attempts to address the factors that cause turnover – “from training to feeling welcomed and supported by supervisors,” the USPS reported in December. A pilot of the program in Northern Virginia decreased turnover 22%, the agency said.

Sounds good, doesn't it? The news that our currency continues to strengthen in comparison with those of almost every other country is like winning the Olympics, right? "U-S-A! U-S-A!"

Once-bustling paper-mill towns in Maine that are now turning to ghost towns tell another story. In a state where making paper was an iconic livelihood on par with Down East's famed lobstermen, half of the paper mills have closed in the past two years. Already this year, the site of the former Millinocket mega-mill (pictured above, nine years after it opened as the world's largest paper mill) was sold to a non-profit for $1, permission to demolish another mill was requested, and the Maine Pulp and Paper Association disbanded.

Donald Trump's tirades against foreign trade resonated in the paper-making regions of Maine, just as they did in the parts of Pennsylvania, Ohio, Michigan, and Wisconsin that once thrived on steel, autos, coal and paper. Solid-blue counties that previously went for Obama voted instead for Trump, flipping the states' electoral votes to the GOP column.

But as even President Trump recently seemed to acknowledge, the "strong" dollar may be the real culprit behind the loss of American manufacturing jobs. Especially in the paper industry, and most especially in Maine.

The Madison mill -- pictured above 1906, the year it opened -- is a poster child for the inability of protectionist policies to overcome currency issues. Under questionable circumstances, the U.S. Department of Commerce in July 2015 imposed import duties on all four of its Canadian competitors in an obvious attempt to prop up the Madison mill.

That wasn't enough to save Madison. It couldn't overcome a 35%-plus "strengthening" of the U.S. dollar against the Canadian currency in just four years.

With most of their expenses in cheap Canadian dollars but their revenue in pricey American dollars, Canadian mills could still make a profit selling into the U.S. despite penalties of as much as 19%. Similarly, UPM, the world's largest and most profitable paper company, found it made more sense to supply supercalendered paper to the U.S. from its weak-euro European mills than to continue operating Madison.

The Madison mill made its final roll of paper in May 2016. It was sold to an industrial liquidator late last year.

The Digital Revolution and the strong dollar have been bad news for all U.S. makers of publication papers. Maine has the additional bad fortune of mills that were focused on lightweight papers like newsprint, directory, supercalendered, and lightweight coated that have borne the brunt of the shift to digital media. Plus, its out-of-the-way location gives it at best minimal freight advantages versus Canadian mills when shipping to the Midwest or versus European mills when shipping to must of the U.S. East Coast.

Protectionist policies are no match for declining demand and a rising dollar.

Saturday, February 18, 2017

If you think your mailbox is fuller on Saturdays than it used to be, it’s not your imagination.

During the past year, the U.S. Postal Service made operational challenges that cause some letters to be delivered on Saturday even though they don't have to be delivered until the following week.

“When feasible, based on local operating conditions, the Postal Service advances Standard Mail [letters] scheduled for Monday and Tuesday delivery into a processing window that enables delivery on Saturday, which is generally the lightest delivery day of the week,” the USPS told the Postal Regulatory Commission yesterday (PDF, page 5).

“This practice balances the processing and delivery workload for Monday, which is generally the heaviest delivery day of the week.” Postal officials were responding to a question about how they managed to improve on-time delivery for Standard Mail during FY2016.

Last year, the Postal Service delivered more than 55 billion Standard letters, which generally are mass solicitations sent by businesses and other organizations. (The growing category is often called junk mail --but not by the Postal Service.)
Standard letters have lower postage rates than do First Class letters, partly because First Class enjoys more expedited delivery.

Friday, January 13, 2017

After American Media Inc. complained that the original headline was "defamatory," Folio: magazine today tweaked the headline on an article about AMI's Star magazine publishing SlimFast ads that masqueraded as articles.

Folio: also published AMI's statement about the article, in which the publisher of National Enquirer and other scholarly journals huffed, "We are very concerned about the defamatory headline and implication in your article, [sic] that falsely states AMI 'pulled' SlimFast ads after a challenge from the Better Business Bureau."

You see, when Star headlined an article about the long friendship of John Travolta and Tom Cruise with "30 Year Gay Secret" even though the article had nothing more than vague references to "gay rumors," that's not defamatory. It's poetic license. (Citing the "bait-and-switch" cover, Gossip Cop gave the article a zero on its accuracy scale.)

Or when the Enquirer ran one hideously Photoshopped cover image after another during the Presidential campaign to "prove" that Hillary Clinton was about to die from brain cancer, that's free speech.

(As Politico's Jack Shafer wrote, "You don’t have to be a Hillary lover to be repulsed by the Enquirer’s coverage of her; the sicknesses the Enquirer has attached to Clinton would fill a medical encyclopedia—muscular dystrophy, multiple sclerosis, Alzheimer’s, endometriosis and brain damage from her concussion. She suffers from obesity (289 pounds), brain cancer and mental disorders, and has had two strokes, the Enquirer claims.)

But when Folio:, a magazine that covers the U.S. magazine industry, writes "Pulls" instead of "Discontinues," that's a DEFAMATION SHOCKER!, as the Enquirer's headline writers would say. Time to call the lawyers and shoot the messenger.

What Folio: didn't alter was its description and depiction of how AMI's round-heeled business ethics were on display in the SlimFast campaign -- including the factoid that "a number of dubious articles, purportedly written by editorial staffers but almost certainly part of a paid SlimFast campaign, proliferate throughout AMI's portfolio of websites."

But Folio: did add some comic relief to the updated version by publishing AMI's shoot-yourself-in-the-foot statement verbatim, including the comment that the company doesn't think it did anything wrong.

Wednesday, January 11, 2017

Buried in two recent U.S. Postal Service reports are data and statements persuading me that the USPS's Flats Sequencing System will never end up saving money, much less recoup its $1.3-billion investment.

I explain why in an article that Publishing Executive published today, which also points out that the combination of the FSS fiasco and a Trump presidency could be yugely expensive for Periodicals publishers. To provide more depth to that discussion, here are the relevant excerpts from the two reports.

The first is the brief "FSS Scorecard" section of the agency's Annual Compliance Report. It reveals that the already slow and erratic FSS machines ran even slower and worse last year -- despite various "tiger teams," machine tweaks, and changes to mailing rules that were also focused on making FSS work:

FSS Scorecard

Chart from USPS FY2016 Annual Compliance Review

The Postal Service continues to measure critical aspects of FSS performance at each processing location. The resulting scorecard is utilized to develop a list of specific sites with the greatest opportunity for improvement. The table reflects the Postal Service’s performance on the key metrics utilized by the scorecard.The DPS percentage metric represents the percentage of all flats destinating in FSS zones that was sorted to DPS using FSS for city carrier delivery. Flats volume outside of the FSS DPS percentage is either processed on the automated flat sorting machine (AFSM) or in manual operations.The Mail Pieces At-Risk percentage identifies the percentage of mail that does not follow the prescribed path of sortation through a machine-based operation (e.g., on the FSS). These pieces, while not representative of service failures, require some additional handling in order to ensure they meet service expectations.At-Risk metrics enable the Postal Service to identify operational processes and machine elements that need to be reviewed for possible improvement. The metrics are broken down into three groups – Maintenance, Operator, and Shared (both Maintenance and Operator) – based on the ability of that group to affect the metric being tracked. Data supporting these metrics are gathered from machine End-of-Run (EOR) statistics. The Postal Service uses raw event indicators from the machine, such as the number of jams, and extrapolates the potential number of pieces that have fallen outside normal processing. Proper maintenance and adherence to operational guidelines minimizes the pieces at risk, hence decreasing the indicator.

Below are two excerpts from the "FSS Pricing and Passthrough" section of aUSPS report on Periodicals pricing that include a couple of interesting revelations:

1) After eight-plus years, postal officials are still trying to figure out how to make the "infant"FSS process work. In other words, not only is the system not working, the USPS doesn’t have a plan yet for getting it to work.

2) The original idea was that FSS copies would cost the USPS no more than carrier-route copies, but now the vision is for the savings on non-carrier-route copies to make up for the “slightly” higher costs of carrier-route copies. With carrier-route copies now constituting more than 70% of non-FSS flat mail (and likely to rise because of better incentives in the rates that will take effect later this month), it’s difficult to see how a system with such long-term underperformance will ever make that work:

The Postal Service’s experience with the FSS is in its relative infancy, and the Postal Service is still learning about which operational flows will minimize the cost of FSS processing. Currently, the presumed efficient preparation for FSS sites is governed more by mailing rules than by pricing incentives. ... The premise of the FSS program is that increased mail processing costs (possibly substantial increases for pieces that previously qualified for Carrier Route rates) would be offset by reductions in delivery costs. The net reduction is intended to be systemic, meaning that while overall costs are reduced, some individual components may decrease substantially (mail previously prepared as 5-Digit, 3-Digit, ADC and MADC), while some individual components may increase slightly (Carrier Route). The dilemma is that there is not a practical way to set rates to reflect the fact that, in FSS zones, there is no cost distinction between mail previously paying Carrier Route rates and mail previously paying 5-Digit rates. This dilemma is further complicated by the fact that mailers previously paying predominantly Carrier Route rates do not want higher prices for their Carrier Route pieces.

I’m told that postal officials won’t even discuss the possibility of scrapping the FSS or radically repurposing the machines. (Could the machines be used to sort inefficient mail pieces into carrier-route bundles? Could machines located near major printing plants be turned into giant co-mail machines?)

One issue is that casing units (which carriers use to sort flats into delivery sequence) have been removed from so many delivery units served by the FSS. In other words, before waiting to see whether the FSS would work as planned, postal officials “burned the ships.” Now they’re saying, “Shit, we have no way to get out of this God-forsaken place. Who knew?”

The floor space once devoted to casing units often gets turned over to the growing parcel business. And the wave of recently hired carriers doesn’t have the experience or route knowledge to case efficiently. (With the FSS failing to sort nearly half of the flat mail assigned to it, by the way, there’s still plenty of casing going on. But it’s increasingly being done by inexperienced people using inadequate space.)

So I can understand the reluctance to ditch the FSS. But why are postal officials wanting to throw good money after bad by subjecting yet more areas of the country to FSS processing?

Lucky for me, I’m in the publishing industry, so I know not to accept anything from Facebook at face value.

Many of my colleagues learned that lesson the hard way last year, after starting off 2016 thinking that Facebook was the path to publishing riches. Their traffic from Facebook was booming, and thanks to Facebook Instant Articles program they could make money by publishing articles directly on Facebook.

They soon discovered that Facebook is a fair-weather friend. Instant Articles turned out not to be such a good deal for publishers. And about mid-year, Facebook tweaked its algorithms in ways that cut some publishers’ referrals in half.

Those death notices (“Clint is gone – After the rumors were confirmed true . . .”) aren’t the only Facebook fakeries. And we’re not just talking about out-of-date photos and other harmless profile enhancements. (The boobs on that friend you haven’t seen since high school? Totally fake. You would have remembered if they had looked like that. And if they had looked like that back then, imagine what gravity would have done to them by now.)

But the word deserves even better than that. Because "Fakebook" encapsulates several key trends – the continuing failures of digital advertising, a strategy pivot by publishers, and even the persistence of print magazines – I hereby declare it The Publishing Word of 2016.

Not dead yet
Let’s take a look at those fake obits, if you dare. They all linked to alleged articles, purportedly from well-known publishers, describing how the actually-not-dead celebrity overcame erectile dysfunction thanks to Advanced Alpha Testosterone Booster.

AATB contains Horny Goat Weed and other natural remedies and is endorsed by everyone’s favorite TV quack, Dr. Oz – so how could you go wrong?

I swear I did not distort this "no-bit."

(I know what you’re thinking: Why does Facebook keep targeting these ads at me? Let me assure you that Mr. Tree is a hardwood, whose hands are larger than those of a certain President-elect. But I have published a few articles about Viagra, such as this. Like the furniture store that’s been stalking me on the web for months because I once accidentally clicked on one of its ads, these fake-obit ads demonstrate how easily online-ad targeting algorithms can go awry.)

The Bruce Willis obit (or is it a no-bit?) links to a supposed AARP interview (below) in which Willis’ wife describes how AATB perked up the couple’s sex life by bringing about Bruce’s miraculous resur-erection. (Hallelujah!) The fake article is surrounded by stuff copied from AARP’s web site (without the links) and even a copycat web address (aarp.com-newssource.net).

Sexual-assault victims worldwide will be pleased to see Bill Cosby’s wife proclaim – supposedly on Fox News -- that “now his hard erections last for two hours.”

But I call the attention of my publishing friends to that page’s “Featured in” list of mostly legacy-media trademarks, including four magazines, that are thoroughly abused in an attempt to give AATB a whiff of respectability.

Here’s the lesson: Even a sleazy seller of snake oil (Yeah, that’s unfair: Snakes don’t obsess about erectile dysfunction.) understands the credibility that’s still associated with magazine media – perhaps better than the publishers of those magazines.

Out-Fakebooking Fakebook
I think 2016 was the year publishers finally started getting the picture – when they accepted that they could never thrive simply by getting more page views for highly commoditized ads paying ever-decreasing CPMs. No publisher has the scale to out-Facebook Facebook or to survive on bottom-feeder ads.

Instead, consumer publishers are increasingly acting like the best B2B publishers, focusing on leveraging their reputations and their superior content to build engaged audiences that are attractive to premium advertisers. They are pursuing the kind of advertisers (and CPMs) that are increasingly turned off by Fakebook’s fakeries.

The native-advertising boom is especially beneficial to premium publishers that have solid reputations, providing a welcome escape from ad blocking and banner blindness.

Taboola on TheAtlantic.com

And even good-old-fashioned print magazines are seen as part of the credibility equation: As Google has been telling us for several years, online information is more reliable if a respected publisher paid to put it into print – or even if it’s web-only content on a print-publication’s site.

Considering how bad 2016 apparently was for print advertising, relatively few magazines were shut down. No more are publishers planning the imminent demise of their magazines; instead, there’s more sharing of resources with the digital side and more recognition that being associated with a magazine differentiates a web site from the likes of Fakebook.

Sure, many magazine (and newspaper) companies sullied their credibility in the past year or so by jumping on the “recommendation engine” bandwagon, accepting money to post little turds of clickbait from networks like Outbrain, Taboola, and Revcontent.

Say what? Outbrain on washingtonpost.com

On the Sleaze Scale, items like “29+ Celebs Who Look Hot On TV, But Are Really Just Jerks” and “This Simple Skin Fix May Surprise You” pale in comparison with the worst of Fakebook ads. But they undercut our reputations and make our web sites less attractive to major-brand advertisers.

However, there’s good news on that front: I recently revisited the magazine-publishers’ sites I studied nine months ago for a Publishing Executive article on recommendation engines and was pleasantly surprised by what I saw – and what I didn’t see. Some publishers have toned down the sleaze and scaled back their use of recommendation engines, while others have kicked the clickbait habit altogether.

I’ll leave you with a few questions:

Have all of Facebook’s significant reporting errors been revealed? Or will more dirt surface during 2017?

Will Fakebook’s failings send more business to publishers, or will all the benefits accrue to Google? Or is Fakebook such a Teflon-coated irresistible force that not even all of these embarrassments will slow it down?

Were Fakebook’s reporting errors just mistakes, or do they indicate something more systemic or even sinister?

The Mainstream Media Cites Dead Tree Edition

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